In today’s business world, revenue models are the driving force behind companies’ profitability and success. Revenue models are the framework that determines how a business makes money, and they come in different shapes and sizes. In this blog post, we’ll explore the top 10 revenue models and provide examples of Indian companies that use them.
1. Subscription Model
The subscription model is a revenue model that charges customers a regular fee for access to a product or service. This model works well for companies that offer ongoing value to customers, such as streaming services, software as a service (SaaS), and subscription boxes. Subscription-based revenue models create a predictable stream of income for businesses and provide customers with a consistent experience.
Example: Hotstar, a streaming platform owned by Disney+, offers monthly and yearly subscriptions for exclusive access to movies, TV shows, and sports events.
2. Freemium Model
The freemium model is a revenue model that offers a basic version of a product or service for free, but charges for premium features or functionality. This model allows companies to attract a large user base with a free product, while also generating revenue from users who are willing to pay for advanced features.
Example: Freshworks: A customer engagement platform that offers a range of products including Freshdesk, Freshchat, Freshsales, and Freshservice. Freshworks offers a free version of all its products with limited features, and users can upgrade to a paid version to access advanced features and additional functionalities.
3. Pay-Per-Use Model
The pay-per-use model is a revenue model that charges customers for individual uses or transactions. This model is common in industries like ride-hailing, where customers pay for each ride they take. Pay-per-use models are flexible and convenient for customers who only use a product or service occasionally.
Example: Ola, a ride-hailing app, charges customers per ride based on distance and time taken.
4. Advertising Model
The advertising model is a revenue model that generates revenue through ads displayed to users. This model is common in the media and entertainment industries, where users consume content for free in exchange for viewing ads. Advertising models generate revenue by charging advertisers to display ads on their platforms.
Example: Times Internet, a digital media company, generates revenue through ads displayed on its online platforms like Times of India, Economic Times, and Navbharat Times. Though not an Indian company but Facebook is the perfect example for this model in the social media segment.
5. Affiliate Marketing Model
The affiliate marketing model is a revenue model that generates revenue by promoting other companies’ products and earning a commission on sales. This model is common in e-commerce and online marketing, where companies earn a commission by referring users to other businesses.
Example: CashKaro, an online cashback and coupons website, earns a commission by referring users to e-commerce websites like Amazon, Flipkart, and Myntra.
6. Transaction Fee Model
The transaction fee model is a revenue model that generates revenue by taking a percentage of transactions made through a platform. This model is common in the financial and payment industries, where companies charge a transaction fee for money transfers and payments.
Example: Paytm, a digital wallet and payment platform, charges a transaction fee for peer-to-peer money transfers, bill payments, and online shopping.
7. Licensing Model
The licensing model is a revenue model that generates revenue by licensing a product or service to other businesses. This model is common in the software and technology industries, where companies license their software and intellectual property to other businesses for a fee.
Example: Tally Solutions, a financial accounting software company, licenses its software to businesses for a fee.
8. Crowdfunding Model
The crowdfunding model is a revenue model that generates revenue through small contributions from a large number of individuals. This model is common in creative and innovative industries, where individuals or startups can raise funds for their projects or products through crowdfunding platforms. Crowdfunding can take the form of rewards-based crowdfunding, where individuals receive a product or service in exchange for their contribution, or equity crowdfunding, where individuals receive a share of the company in exchange for their investment.
Example: Ketto is a crowdfunding platform based in India that helps individuals and organizations raise funds for social, creative, and personal projects. Ketto has helped raise funds for causes such as education, healthcare, and disaster relief, and has helped startups raise funds for their products and services.
9. Sponsorship Model
The sponsorship model is a revenue model that generates revenue through sponsorships from businesses or organizations. This model is common in sports, entertainment, and media industries, where companies sponsor events, teams, or individuals to gain exposure and reach their target audience. Sponsorships can take the form of cash or in-kind contributions, and can provide businesses with branding and marketing opportunities.
Example: Indian Premier League (IPL) is a professional Twenty20 cricket league in India that attracts millions of viewers each year. IPL has multiple sponsors, including Vivo, Dream11, and Coca-Cola, who sponsor teams and events and gain exposure to millions of cricket fans across India and around the world.
10. Hybrid Model
The hybrid model is a revenue model that combines two or more revenue models to generate revenue. This model is common in industries where multiple revenue streams are possible, and businesses can benefit from diversifying their revenue streams. Hybrid models can take different forms, such as subscription-based and advertising-based revenue models, or transaction-based and licensing-based revenue models.
Example: BYJU’S, a learning app based in India, uses a hybrid revenue model that combines subscription-based and advertising-based revenue models. BYJU’S offers a free trial of its learning app, and charges a subscription fee for access to its full content library. Additionally, BYJU’S generates revenue through advertising on its platform, and partners with businesses to offer co-branded content to its users.
In conclusion, revenue models are the backbone of a business’s profitability and success. By understanding the different revenue models available and choosing the ones that work best for their business, entrepreneurs and business owners can maximize their revenue potential and achieve their business objectives.